With about 40% of Delaware’s population aged 50 and older and one out of every five seniors relying on their social security for the bulk of their income, there was a call for change in the Diamond State.

Delaware has passed legislation to establish a state-run retirement savings program for private-sector employees. With 38% of private sector workers in Delaware without access to an employer-sponsored retirement plan, this state program, named Delaware EARNS, will give those employees a chance to save for their golden years.

In this article, we’ll answer some questions you may have about the Delaware EARNS program and explain how it affects Delaware businesses.

How Does Delaware EARNS Work?

Delaware EARNS is a government-sponsored savings program created to help employees working in the state build savings for retirement. Delaware business owners who meet certain criteria are required by law to offer a qualified, employer-sponsored retirement plan or enroll their employees in the program.

Delaware employees will make contributions to the program through automatic deductions from their paycheck into a Roth individual savings account (Roth IRA) unless they choose to opt out. The money in the account will grow tax-free, and employees won't have to pay income tax on any money they withdraw from their account during retirement.

The program is overseen by the Delaware EARNS Program Board but administered by private sector partners. The program launched in July 2024.

Which Businesses Are Affected?

According to the Delaware EARNS website, employers who meet the following criteria are required to register for the program or certify an exemption:

• Employs 5 or more workers
• Was established before 7/1 of the previous calendar year
• Does not currently offer a qualified, employer-sponsored retirement plan to their employees

Registration Deadline

Program deadlines for businesses are based on company size. The current deadline is as follows:

• Employers with 5 or more employees | October 15, 2024

Penalties

Impacted businesses must offer a plan or may face a penalty of $250 per eligible employee per year (up to a max of $5,000 annually).

Who Is Eligible to Save With the Delaware EARNS Program?

Most individuals who are 18 years or older and have earned income in the state of Delaware for at least 120 days are eligible to participate in Delaware EARNS.

The program is voluntary for employees, and they can change their contribution amount or opt-out at any time.

Conclusion

The Delaware EARNS program represents a notable development in retirement planning for Delaware workers. Automatic enrollment and contributions made directly through payroll deductions simplify the process of setting aside funds for retirement.

The program requires businesses with 5 or more employees that were established before 7/1 of the previous calendar year to either register and facilitate Delaware EARNS or certify an exemption, so it’s important for Delaware employers to familiarize themselves with the program details and requirements.

Looking for information on the requirements for other states? Check out our resource page here.